By Millie Muroi January 5, 2026 — 3.00pmSaveLog in, register or subscribe to save articles for later.Save articles for laterAdd articles to your saved list and come back to them any time.Got itNormal text sizeLarger text sizeVery large text sizeArtificial intelligence is the No.1 challenge keeping business executives up at night, while inflation, interest rates and staff shortages have faded as concerns for business leaders in the year ahead.The impact of new technologies including AI has also leapfrogged housing affordability as the No.1 societal concern according to KPMG’s annual survey of 274 Australian C-suite executives and board members conducted towards the end of 2025.KPMG Australia chief executive Andrew Yates said firms, including his own, are grappling with the challenges of AI.Credit: Dominic LorrimerKPMG Australia chief executive Andrew Yates says companies, including the one he leads, are grappling with the possible uses, as well as the issues and ethics, of AI.“We’re in the same position,” he said. “For KPMG, probably the area that we’re finding the most quick adoption is in areas like tax, where you’ve got rules or precedent, [meaning] we’re finding the use cases for AI come to us more quickly.”The survey, which asked business leaders to nominate their top five challenges in 2026, found nearly two-thirds (63 per cent) put new technologies such as AI, including its use cases and ethics, among their biggest concerns.That compares to 39 per cent who put AI among their top five concerns in 2025.Meanwhile, digital transformation and optimisation – the biggest concern (53 per cent) in 2025 – came in second, with 54 per cent of business leaders putting it among the top five this year.While KPMG chief economist Brendan Rynne says inflation remains a challenge for businesses, it is not among their biggest concerns in 2026 despite nearly four in 10 (39 per cent) putting “cost controls in an inflationary environment” among their top challenges last year.Advertisement“I think what’s happened is there’s now a bit more recognition that inflation is probably going to be a bit higher than what we saw in the decade from 2010 to 2020,” he says, with businesses having to consider both the extent to which they can adjust prices and how they can manage costs through productivity growth.LoadingProductivity has been at the forefront of politics in the past year. Treasurer Jim Chalmers held an economic reform roundtable in August aimed at finding ways to revive the nation’s lagging standard of living growth and the Productivity Commission last year made 47 reform recommendations aimed at boosting the measure.Finding ways to drive productivity growth was also among the top challenges nominated by business leaders in 2026, with more than two-thirds (35 per cent) putting it among their top five.Despite the challenges, Yates notes businesses are more optimistic than they were 12 to 18 months ago, and that concerns such as staff shortages have faded.“If you went back three to four years ago, particularly as we came out of COVID, the No.1 issue was attraction and retention of talent,” he says. “That really has disappeared right down the list.”The unemployment rate, which hit a historical low of 3.5 per cent in 2022, is now hovering above 4 per cent, with the latest figures from the Australian Bureau of Statistics showing it remained steady at 4.3 per cent in November.Yates also says business leaders are more positive in their outlook when it comes to matters such as investment and looking to expand their firms.“There are challenges CEOs have reported this year, such as continuing to look for growth, which are more positive,” he says. “That’s opposed to if you’re in the depths of a recession, and you’re needing to lay off staff, for example. That’s a much harder, more negative issue to be dealing with, and we’re not seeing that come through the survey whatsoever.”The proportion of business leaders concerned about cyber risks remained steady across the two years at 42 per cent.LoadingHousing affordability remained among the top societal issues flagged by CEOs, with about half – the same share as last year – citing it as a worry. However, the top spot in 2026 was claimed by a new option in the survey: the social impact of new and disruptive technologies such as AI.Yates, who believes the use cases of AI will become more obvious this year for many businesses, says the rise of AI as a concern among business leaders has probably been fuelled by the emergence of generative technologies such as ChatGPT, as well as the boom in investment in the technology.“There’s an awful amount of investment being deployed into AI,” he says. “There’s a sense that if you’re not investing, if you’re not riding the wave, then there’s a real possibility you may get left behind.”The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.SaveLog in, register or subscribe to save articles for later.License this articleBusiness confidenceAIKPMGMillie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via Twitter or email.Loading